November 17, 2010

 

Australia to boost feed wheat sales to Asia-Pacific

Australian feed wheat exports into Asia-Pacific markets are set to rise as recent rain lowers crop quality in eastern Australia where a bumper harvest is expected, traders and analysts said Tuesday (Nov 16).

 

They said continuing rain was turning milling wheat into feed wheat as farmers began to harvest the 2010/11 crop, which could yield as much as 25.5 million tonnes, close to the record 26.1 million tonnes reaped in 2003/04.

 

"Normally Australia would not have much feed wheat available (for export), but the situation is different this year," said Mitch Morison, commodities general manager at AWB Ltd, which handles about a fifth of Australia's wheat trade.

 

"AWB is already making strong export sales of feed wheat, with steady inquiry appearing from customers in Asia and Pacific markets, where we have a significant freight advantage over just about every other origin," Morison said.

 

Demand for lower-quality Australian wheat has increased after wheat stopped flowing from the drought-stricken Black Sea region into the Asia-Pacific.

 

Tight world stocks of corn, an alternative livestock feed to wheat, are contributing to demand for feed wheat from Australia.

 

"The global export market for feed grains is quite strong so that's why there's inquiry around feed wheat," said Wayne Gordon, grains analyst at Rabobank, Sydney.

 

Already there have been some exports of feed wheat from the central Queensland state wheat belt in north-eastern Australia, the first region to harvest grain each season. The region, which in a good year produces premium high-protein wheat, experienced heavy rain in September and October, causing most of the crop to be downgraded to feed wheat.

 

"Central Queensland produced about 250,000 tonnes but around 75% of that was downgraded to feed," said Steve Burt, managing director of Pentag Nidera, the Australian arm of privately owned Dutch firm Nidera.

 

Of the total Australian crop, Burt estimated that four to five million tonnes were at risk of being downgraded to feed quality, most of which would be available for export.

 

He said countries such as South Korea were likely to buy lower-quality wheat from Australia for livestock feed while more price-conscious markets such as Bangladesh and Vietnam were also likely to seek poorer-quality cargoes.

 

"There will be some loss of quality from the rain we've being getting but we really won't know just how big the impact will be until it dries up and headers (harvesting machines) can get back on to the paddock," said Burt.

 

The key areas affected by rain are Queensland and northern New South Wales state where most of country's high-protein Australian Prime Hard (APH) wheat is produced.

 

Prospects that Australia will produce less than 500,000 tonnes of APH wheat, compared with around two million tonnes in a good year, have seen a substantial premium built into price for this grade of wheat.

 

APH is priced around A$360 (US$355) per tonne, delivered to port, compared with Australian Prime White (APW) milling wheat priced at A$265 (US$258.69) per tonne. Australian feed wheat fetches around A$235 (US$229.4) a tonne, though prices can be lower for lesser grades.